June 28 (Bloomberg) -- Genworth Financial Inc., the life
insurer and mortgage guarantor, surged in New York as hedge fund
Highfields Capital Management LP said it is in talks with
management about increasing the value of its stake.

Highfields, led by Jonathon Jacobson, holds more than 25
million shares, or about 5.2 percent, the firm said in a
regulatory filing today. Genworth jumped 11 percent to $5.43 at
4:15 p.m. It has declined 17 percent this year.

The talks cover Genworth’s “global mortgage insurance
assets, its U.S. mortgage insurance assets and its retirement
and protection businesses,” Boston-based Highfields said in the
filing. “Such discussions will address risk mitigation
strategies, possible sale or spin of assets, and similar
matters.”

Genworth is seeking to limit losses tied to home loans and
focus on more profitable business segments. The Richmond,
Virginia-based insurer’s board is looking for a chief executive
officer after the resignation in May of Michael Fraizer.

Genworth trades for less than 20 percent of book value, a
measure of assets minus liabilities. That’s the cheapest
valuation in the 22-company S&P 500 Insurance Index.

“We continue to work actively with the board on plans to
strengthen our capital structure and realign our business
portfolio,” acting CEO Martin Klein wrote in a letter to
investors yesterday.

Genworth’s Rating

Klein sent the letter after Moody’s Investors Service said
it may downgrade Genworth to junk status if its financial
position doesn’t improve. Moody’s reduced the financial-strength
rating of Genworth’s life-insurance operation to A3, citing the
risk of long-term care insurance.

Al Orendorff, a Genworth spokesman, said the insurer is
“always interested in speaking with our shareholders” and
declined to discuss talks with Highfields.

Jacobson, who applauded Fraizer’s departure, told investors
last year that “a savvy management team could create a lot of
value.” He was “fatigued by management’s lack of urgency,”
Jacobson wrote in a July 22 letter, according to a person who
reviewed it.

Jacobson is a former fund manager at Harvard University’s
endowment and co-founded Highfields in 1998. The firm manages
more than $11 billion, according to its website.

Highfields may also discuss Genworth with other
shareholders and existing or potential strategic partners,
according to the filing.